GM Boosts Morale in Germany With No-Layoff Pledge

Mary Barra had clocked little more than a week as chief executive of General Motors (NYSE:GM) when she made a personal appearance at the Opel headquarters outside Frankfurt, Germany. Barra’s message was clear: GM was committing to turning its European operations around. The automaker’s commitment was backed by an investment of $5.5 billion, and GM is guaranteeing there will be no layoffs in coming years at key German plants to give its European unit a true morale boost.

The news of the no-layoff pledge, reported by the Associated Press, comes during a shift in GM’s strategy. After years of declining sales and a lack of direction, GM decided to remove the Chevrolet brand from Europe to avoid any competition with Opel. That move put the Opel brand in the driver’s seat in a market where analysts believe the worst has ended. As a sign of the times, the European auto market grew 13 percent in December compared to the previous year’s stats, with gains of 22 percent by Opel fueling GM’s 13-percent surge in the region.

Pessimists will say heavy incentives propelled the European market at the end of 2013, but the trend is predicted to continue as stabilization is seen from Germany to France and even Spain. Competition in the region from Renault (REUGY.PK) and Volkswagen (VLKAY.PK) is fierce, so automakers will need any edge they can get.

GM’s strategy is to bring attractive new products to the market with exceeding efficiency. To pull it off, the automaker will need a dedicated workforce that can push on without any threat to job security. GM’s closing of a Bochum plant in Germany later this year provides none of that.

The GM announcement that its plants in Ruesselsheim, Kaiserslautern, and Eisenach will remain layoff-free through 2018 offers the company a chance to set aside distractions and put the pedal to the floor. Despite calls for General Motors to exit Europe entirely, automakers have proven there is money to be made in the region.

One of the great challenges for CEO Mary Barra is to prove GM can return to profitability in Europe as Volkswagen celebrates passing General Motors as the second biggest automaker on the planet in 2013. Some of the tricks VW used to pull off the feat included strength in Europe, finesse in China, and a commitment to small cars.

Mary Barra announced during her appearance at Opel headquarters in Ruesselsheim that the plant there would have the assignment of building an all-new vehicle for the automaker, the AP reports. Investors and company executives are hoping it will be the difference-maker Opel needs in Europe. Setting aside any issues with the workforce ought to give GM a fighting chance.